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The Massachusetts Supreme Judicial Court will soon determine whether a millionaire’s
tax initiative is permitted on the November ballot.

Six justices heard oral arguments Feb. 6 over the proposed constitutional
amendment, which would add a 4 percent surcharge on the state’s personal income tax rate for
incomes over $1 million.

The initiative has twice been approved by the Legislature and was certified for the
state ballot by Massachusetts Attorney General Maura Healey (D). The amendment is
being pushed by Raise Up Massachusetts, a coalition of labor, faith, and community
groups.

However, representatives of
five groups have alleged that the proposed amendment violates Article 48 of the state’s constitution in three
ways:

pairing an unpopular provision (the graduated income tax) with two popular ones (funding
for education and transportation), which violates the constitution’s ban on combining
two or more unrelated items—a practice known as “logrolling";

improperly earmarking funding for education and transportation; and

creating a tax.

David Nagle, a Boston-based partner at Sullivan & Worcester LLP who attended the hearing,
said it was hard to tell from the justices’ questions what they might decide.

“They are grappling whether this initiative is in fact an appropriation,” he said.
While the Attorney General has argued there are ample choices within the two broad
categories for legislators to decide how to spend the revenue, opponents say the initiative
ties the hands of legislators.

“It’s that segregation of the assets that is problematic,” he said.

Relatedness Questions

The justices questioned whether levying a graduated income tax is related to generating
revenue for education and transportation—and further asked how education and transportation
are related to each other.

“Somebody could be in favor of education spending, but not transportation,” Justice
Scott L. Kafker said. “Or they could be in favor of transportation, but not a graduated
income tax.”

However, Chief Justice Ralph D. Gants said that the initiative “doesn’t tie the Legislature’s
hands,” because the initiative only generates tax revenue, estimated to be about $2
billion per year. The Legislature still has control over how the money is spent, he
said.

Legislature v. Voters

Meanwhile, plaintiff attorney Kevin Martin, a Boston-based partner with Goodwin Procter
LLP,
reiterated the “logrolling” argument that the initiative attempts to couple the two popular funding provisions with the
unpopular graduated tax provision. Martin further argued that the question of whether
to set a graduated income tax and whether to spend tax revenue on transportation or
on education are three separate public policy questions.

Assistant Attorney General Juliana deHaan Rice disagreed, saying the ballot question
proposes “a broadly based tax initiative that will make more resources available from
the income tax.”

Justice David Lowy questioned whether the initiative is “setting a tax and picking
two important areas of spending?”

“Isn’t that what the Legislature does?” Lowy asked.

In response, Rice said that this court has held that voters get to make that decision
“within a range and array of choices.” She said that the ultimate decision of how
the money is allocated is still in the Legislature’s hands.

“In this provision, everything moves in the same direction,” Rice added.

Voicing Opposition

After the hearing, the Associated Industries of Massachusetts reiterated its opposition
to the initiative on its
blog.

“AIM opposes the graduate-tax proposal on a policy basis because it would harm thousands
of small and medium-sized business that pay taxes on an individual basis,” the post
said. “The Massachusetts Department of Revenue estimates that 80 percent of the returns
that would be affected by the surtax include some amount of business income.”

Associated Industries of Massachusetts is one of the five groups that filed the October
2017 complaint—the other groups are Representatives for Massachusetts High Technology
Council, the Massachusetts Taxpayers Foundation, the National Federation of Independent
Businesses, and the Massachusetts Competitive Partnership.

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